BT to cut another 20,000 jobs

Sunday 7 April 2002 23:00 BST

BRITISH Telecom has announced plans to cut up to 20,000 jobs - more than 10% of its workforce - to reduce costs. The jobs will be shed through natural wastage at a rate of about 5,000 to 6,000 a year over the next three years.

New chief executive Ben Verwaayen said that he expected the group to cut jobs over each of the next three years mainly at BT Retail and BT Wholesale. He also warned that unless its German, Dutch and Spanish business services under BT Ignite became profitable they would be closed with the loss of another 2,000 jobs.

Verwaayen said: 'We have cut around this number of jobs over each of the last couple of years and will continue to do so. There will be no compulsory redundancies, we can achieve all this through natural wastage.'

News of the job cuts came as the Dutchman, who took over from former chief executive Sir Peter Bonfield in February, promised to 'delight' its customers, resume paying a dividend and become the benchmark for the industry.

'We will achieve profitable growth by striking the right balance between growth and managing our finances with great discipline', he said.

'We will neither grow for growth's sake nor cut costs as an end in itself. We will continue to manage our debt down, we will stay within our existing capital expenditure envelope. And we will return to the dividend list.

'We are going to act as one company focused on our customers. If we can get our customer satisfaction right, introduce new and innovative services, manage our costs and cash effectively and unite our people, we can deliver real value to our shareholders.'

Verwaayen outlined a seven-point plan for the next three years:

Relentless focus on customer satisfaction Financial discipline Broadband at the heart of BT BT Ignite (the business services) to end losses by March 2003 All UK networks under one management BT brand to be extended into new areas such as mobile services to business Motivated staff.

Verwaayen said he wanted to see annual organic growth of between 6% and 8%, ebitda growth of 28% to 30% and earnings per share growth of at least 25%. He said capital expenditure would be held below £3bn a year, free cashflow could hit £1bn to £1.5bn in 2004-5 and net debt could be driven below £10bn. He identified cost savings totalling at least £375m in BT Retail and Wholesale, with other unspecified savings from central overheads.

He ruled out further spin-offs and 'burying our heads in internal restructuring'. He promised retail customers easier contact, aimed at cutting complaints by a quarter each year.

The retail business will also announce later this month a new service that will connect customers to the internet without going through an internet service provider.

Verwaayen said: 'By focusing on delighting our customers, achieving good growth from sensible investments, and by setting our objectives to stretching but achievable aims, BT can return to its rightful position as the benchmark of the industry.'

Meanwhile, BT Group said it would introduce a discounted high-speed Internet access package in the coming weeks in a concerted push to hit its ambitious goal of 1m broadband customer by next summer. BT has temporarily dubbed the new broadband package 'Direct'.

It said it would provide full details, including prices and which markets it was intended for, on 24 April. The announcement underlines the importance BT has placed on broadband as a growth catalyst for the indebted telecoms firm.

Internet service providers and telecommunications providers are banking on broadband access, which enables consumers to surf the Net at speeds of almost 10 times that of conventional dial-up connections, to boost their sagging internet businesses. The UK has been a laggard in broadband as wholesale rates were, until last month, too high to stir any meaningful demand.

Rivals were caught off guard by the announcement. One executive at a competing British ISP said she was unsure how BT could offer a broadband product at a cheaper monthly subscription than £29.99 ($42.93), the present market price, and still manage to break even.

Competitors, including AOL and Freeserve, have pledged to blow the whistle on BT should they find evidence that the former monopoly is unfairly cross-promoting its own ISPs, including BT Openworld, and now the 'Direct' offer.